CPF Special Account Closure After Age 55

Hello there! Welcome to another edition of SG Retire Steady Newsletter, where I share my insights, experience, resources and knowledge so that you can achieve financial freedom in a sensible and reliable manner. Read on!

At Singapore’s Budget 2024 on 16th February, DPM Lawrence Wong announced big changes to the CPF system for those aged 55 and above. Let’s dig deeper into those changes.

Closure of CPF Special Account after age 55

This is the biggest change of them all. Currently, SA gives 4.08% p.a. interest. If you are above 55, and have already met the FRS in your RA, you are able to withdraw your Special Account savings anytime while having your balances getting the attractive 4.08% p.a. interest.

In 2025, anyone above the age of 55 will have their SA closed, with the balances going to RA first to fulfill the FRS. Remaining funds from SA will be channelled to OA.

This represents a drop of 1.58% p.a. interest on your CPF Savings from SA. If $300k of your savings is impacted in this transfer, this represents a $175,939 drop in interest earned over 20 years. That’s quite a big deal considering this drop will translate to around $1.5k/month for 10 years.

Increase in CPF contribution rates by 1.5% in 2025

In 2024, the total CPF contribution rates is 31% of wages for age 55 to 60 and 22% of wages for age 60 to 65. This will be increased to 32.5% and 23.5% respectively. 0.5% increment will come from the employer while the remaining 1% comes from the employee.

If you are earning $10k/month, this represents a contribution increase of $80/month for you and $40/month for your employer (based on CPF salary cap of $8k).

With the closure of SA account after age 55, the increased amount will be fully allocated to your RA up to the FRS. If your RA already hit the FRS, then your allocation will go to your OA.

Revision of Enhanced Retirement Sum to 4x Basic Retirement Sum

ERS is the maximum amount that you can have in your RA in that particular year. While hitting FRS is compulsory before you can withdraw your remaining funds, hitting ERS is voluntary. If you were to top-up your RA above the FRS, you will be entitled to receive a higher payout for CPF Life from age 65 onwards.

ERS will be raised to 2x your FRS from 2025 onwards, giving you a chance to put more of your funds into the CPF Life scheme.

For context, if you are 55 this year and have hit FRS, you can expect to receive $1,650/month for males and $1,540/month for females from 65 onwards. With the “enhanced” ERS, you will expect to receive $3,210/month for males and $2,990/month for females. That’s about 1.95x what you will get for FRS.

Personally, I am not a fan of topping up to ERS based on some calculations that I have done. I will not be sharing those in this article. If you’d like to hear my thoughts on it, do reach out and we can have a private sit down.

Will there be more changes in the future?

CPF, like all other government schemes, is dynamic in nature. Changes will be made to adapt with various factors such as longevity, interest rates and population demographics.

We have to adapt to these changes as well to ensure we are financially ready to live out the retirement of our dreams.

That’s a wrap for this edition! Thanks for being here.

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Sim Jit-Vern
B.Eng (Hons), CFP, ChFC, CLU, CIAM, ADWM, ASEP, IBFA

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